Rishi Sunak became Prime Minister on 25 October 2022 and his first cabinet appointment was that of Chancellor. Jeremy Hunt remained in post. The Chancellor had been due to publish the Government’s medium-term fiscal plan on 31 October 2022, but he has now delayed this until 17 November 2022, while also upgrading it to a full Autumn Statement. The Office for Budget Responsibility (OBR)’s economic and fiscal forecast will accompany this.
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Following its consultation in May 2022, The Pensions Regulator (TPR) has published a new enforcement strategy, which sets out the overarching aims of its enforcement work (excluding automatic enrolment) and provides insight into the framework TPR applies when selecting cases for enforcement action. As part of its strategy, it has consolidated its enforcement policy, including the new criminal powers under the Pension Schemes Act 2021, as well as updating its prosecution policy to incorporate these new powers. It has also published its consultation response. The documents are intended to give a clearer understanding of how TPR will operate and what it will consider as each case progresses.
The single enforcement policy sets out TPR’s wide-ranging approach to investigations and use of its enforcement powers in respect of defined benefit, defined contribution and public service pension schemes, as well as some aspects of master trust enforcement. Among the changes in response to feedback from the consultation are additional case studies and examples to give an indication of the principles that TPR will apply in certain instances, as well as further attempts to elucidate how TPR’s powers meet its objectives as well as those of other regulators. TPR states: “It is important that we do not try to be too prescriptive in our policy, as the circumstances where this arises are often both scheme and fact specific. We need to be able to work flexibly with other agencies where appropriate, to ensure that we achieve the best outcome for members.
This approach is reinforced by TPR's Director of Enforcement, Erica Carroll in a blog summarising the new documents and how they have evolved, which emphasises that they “adopt a principles-based approach focusing on the risk and harm factors in deciding which enforcement cases to pursue”.
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The DWP has published an updated version of its guidance on ‘Reporting costs, charges and other information: guidance for trustees and managers of occupational pension schemes’, effective from 21 October 2022. The statutory guidance sets out the matters to which trustees should have regard when producing an illustration and when publishing certain information, including the scheme’s Statement of Investment Principles.
It has introduced new sections for collective money purchase (CMP – but referred to as CDC in the title) schemes as they “will only have one arrangement or fund into which contributions will be paid they do not need to identify a default arrangement; the illustration will be in respect of the CMP fund and should reflect the relevant design of the fund under the scheme rules”.
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The new Chancellor, Jeremy Hunt, has wasted little time in undoing the uncosted proposals in Kwasi Kwarteng’s fiscal event that he had not had the opportunity to reverse himself (see the additional rate u-turn).
In an announcement on Monday 17 October, which was followed by a Parliamentary update, the Chancellor announced that the proposed cut to the basic rate of income tax would not go ahead in April 2023 – further the 20% rate would continue until a cut is affordable, described as “indefinitely”, so beyond Rishi Sunak’s timetable, which had planned to reduce the rate in 2024. The Energy support package is now curtailed, running in its current guise until April 2023; the Treasury will come up with something more targeted (and hence cheaper) beyond then.
However, the reduction in National Insurance contributions of 1.25% (the Health and Social Care Levy) from 6 November will go ahead – this was a reversal of July’s increase!
It was announced that planned changes on corporation tax had been unwound at the end of last week. Before the mini-budget, corporation tax was due to increase from its current 19% level to 25% from April 2023. The mini-budget stated that this increase would be abolished, with the corporation tax rate being maintained at 19%. The PM has now announced that the increases will go ahead.
While warning of the need for spending cuts and tax rises, the Chancellor avoided committing the Government to maintaining the Triple lock on pensions, but he did say that “every decision we take will be taken through the prism of what matters most to the most vulnerable”.
The Government still intends to publish its medium-term fiscal plan on 31 October, accompanied by an OBR forecast.
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DWP has published a response to its consultation on the notice period that the Secretary of State must provide to industry when setting the dashboards launch date (the “Dashboards Available Point” (DAP)) – “ Pensions Dashboards Government response to the Pensions Dashboards: further consultation ”. The response also confirms that the Government is proceeding with measures to allow the Money and Pension Service (MaPS) and the Pensions Regulator (TPR) to exchange information.
The DAP is the point at which pensions dashboards services will be made available to all members of the public. The response confirms that this will be a single ‘big bang’ launch date, rather than some form of phased approach.
The Secretary of State must now give six months’ notice of the DAP. When the Government consulted on the measure in the summer it had proposed only 90 days. Almost 70% of respondents argued that this was too short a period, with the primary concern being the resource implications of preparing for the DAP, as it is expected to prompt significant traffic in the form of member enquiries, for example in resolving ‘possible matches’.
DWP plans to work with industry to establish, by April 2023, what matters the Secretary should take into account before issuing the DAP notice order; these would be established by “rigorous testing” and could include the sufficiency of coverage, the system must work in practice, safety and security of the service and user experience.
In addition, the response confirms that the Government will proceed with proposals to enable exchange of relevant information between MaPS and TPR.
Separately, the DWP has published “ Pensions dashboards: draft guidance on deferred connection ”, concerning the limited circumstances in which schemes may apply to defer (for up to twelve months) the date by which they must connect to dashboard services.
Schemes will need to evidence that they had embarked on a programme to transfer to a new administrator and/or that they had entered into a contract to retender the administration such that the timetable is both reasonable and conflicts with the scheme’s staging deadline. Even if these requirements are met, the scheme must also set out on the application form whether complying with the current staging deadline would be disproportionately burdensome and whether it would put members’ personal data at risk.
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It took longer than expected to be formally announced, but following Guy Opperman’s departure, Alex Burghart has been appointed as the new Pensions Minister. He is the Parliamentary Under Secretary of State (Minister for Pensions and Growth) having dropped his predecessor’s reference to Financial Inclusion. Cabinet membership falls to Chloe Smith as the Secretary of State for Work and Pensions.
Other Ministers with remits that extend into the pensions brief include several Treasury positions. Jeremy Hunt replaced Kwasi Kwarteng as Chancellor on 14 October and Ed Argar replaced Chris Philp as Chief Secretary to the Treasury. Elsewhere in the Treasury Richard Fuller (Economic Secretary to the Treasury), and Andrew Griffith (Financial Secretary to the Treasury) whose role includes both the pensions brief and oversight of HMRC, both survived the changes.
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The Pensions Regulator (TPR) has published a statement on “Managing investment and liquidity risk in the current economic climate”. Understandably, much of the statement focuses on the effect of the “unprecedented speed and magnitude at which gilt yields [have] increased” and the short-term liquidity pressures that this has created for DB schemes with Liability Driven Investment (LDI), whereby LDI managers “sought further collateral”. TPR recognises that the challenge for schemes has been access to liquidity, to maintain liability hedging positions without which their funding positions would be less well protected against future falls in bond yields. Separately, TPR’s Chief Executive, Charles Counsell stressed that “this has not meant that DB schemes are on the brink of collapse” in a speech to the PLSA annual conference.
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The Treasury has brought forward the planned date for its medium-term fiscal plan to 31 October 2022. In a letter to the Treasury Select Committee, the Chancellor, Kwasi Kwarteng, confirmed that he has commissioned the Office for Budget Responsibility’s forecast for this new date.
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The FRC has published AS TM1 version 5.0 and guidance which will apply to statutory illustrations issued on or after 1 October 2023 (and, pending final regulations, calculations for Pensions Dashboards too).
They have made a handful of modest changes to the proposals in the consultation, but have kept with:
Going forwards accumulation rates will be reviewed as at 30 September (instead of 31 December) to allow time for a one month consultation in November and AS TM1 to be published by 15 February for application to the following tax year. There will also be a review in 2022-2023 with the possibility of revising the assumptions ahead of October 2023.
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The Pensions Administration Standards Association (PASA) has published guidance on DC transfers following three recent developments: The Conditions for Transfer regulations published in November, the Stronger Nudge to pensions guidance and the prospective increase to the normal minimum pensions age.
The PASA guidance aims to promote high standards and to improve transfer option communications, thereby helping savers to make informed choices in a secure environment. To this end it sets out a standard, non-prescriptive process flow for transfers and recommends that trustees negotiate Service Level Agreements for processing transfers and bespoke member communications with their administrators. There are also template communications for smaller organisations.
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10 days on from the fiscal event which shook the financial markets, the Chancellor, Kwasi Kwarteng, has today announced that the Government will not be proceeding with the removal of the additional rate (45%) of income tax. Both the Chancellor and the Prime Minister described it as having “become a distraction” from the mission to deliver economic growth to tackle the country’s challenges.
The other measures that were announced in the fiscal event, such as the energy subsidy scheme, NI reversal and the cut to the basic rate of income tax will continue as previously announced.
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